RCI Hospitality Holdings, Inc. (NASDAQ:RICK) Q4 2022 Earnings Call Transcript

Eric Langan: Yes, I mean it’s definitely a tough market right now. What we’re seeing is a kind of a small drop off of what I would call the blue collar customer, basically our lower-margin customers but most of that is being made up by our high-margin customers and VIP spend at this time. So, the numbers have been very steady as far as revenue-wise with the previous quarter. I was kind of hoping we’d get an increase. We’ll kind of see how the next couple of weeks so we’ve got a lot of Christmas parties that happen between now and the 24th or 23rd really. So, we’ll see how those Christmas parties go, how much business they bring in and what that looks like. But so far, I think we’re going to be pretty close on revenue-wise with analyst expectations. And I think that because of the higher in spend, hopefully, our margins will stay steady as well.

Anthony Lebiedzinski: Okay. Yes. Thanks for that. And then in terms of Bombshells’ operating margins, even excluding some of those non-recurring items. I mean, they were in the mid-teens, I would say. I think in the past; you’ve talked about the operating margins for Bombshells. You wanted them to be in the 20% range. So, how should we think about segment profitability going forward for Bombshells?

Eric Langan: Yes, sure. I mean, I’ve always said 18% to 22% was our target. And I think that’s what they’ll basically come in it when — as they mature, we’ll be in that 18% to 22%. We’re kind of on the bottom end, but that is our worst quarter, that quarter. Fourth quarter is always our weakest quarter if you look historically. And so we’ll see how they look in this October, November, December quarter. We have been talking, we are working on some changes, doing some more drink specials, some higher-margin appetizer specials where we can discount stuff without hitting the margins or profitability as much. And so that is starting — we’re starting to do some of that in some of our blue collar clubs around the country as well, where we’re going to start driving more traffic.

The one thing about Bombshells is we really don’t spend any money on marketing. It’s basically social media marketing, stuff like that. So, we are looking at some possible marketing partnerships and some other things with Bombshells that would help drive traffic as well. And I think I say we’re going into a little bit of a different economy that we’ve had in the past. And so we’re going to have to be creative and do the things we do. And — but I think even the worst case, we’re going to stay in this 18% to 22% range. It’s nice when we can have some big months and big events that drive that up into the 20%, 24%, 25%, 26%. But I do think overall that the average is going to be in the 18% to 22% range.

Anthony Lebiedzinski: All right. That’s very helpful color. And then I guess my last question before I jump back in the queue. So, you will be spending certain money on the Central City and some other initiatives. Can you give us a sense as to how much you look at the spend for CapEx and if you have a maintenance CapEx number for fiscal 2023, that would be very helpful?

Eric Langan: I don’t really have a CapEx number. I know that we want to invest $200 million a year for the next three years. So, our goal will be to try to get close to the $200 million. I think last year was $141-something million, I think we got invested. CapEx is around $6 million — $5 million, $6 million a year, I think. Maintenance CapEx, I’m sorry, maintenance CapEx, yes. I don’t think that’s going to change a whole lot for this year over last year. Should be the same.

Anthony Lebiedzinski: Got it. Thanks and best of luck.

Eric Langan: All right. Thank you.

Mark Moran: Thanks so much for the question. Next up, we are going to bring Lynne from Water Tower Research. Lynne, please take it away.

Lynne Collier: Thank you. I just have a question about casino opportunities in Colorado. Are there any additional opportunities?